Social Security is the largest single program in the federal budget. The retirement and disability program will cost about $950 billion this year, which is about 23 percent of the entire federal budget. Along with Medicare and Medicaid, these “entitlement” programs are already the main drivers of federal spending. Unless reined in, Social Security and its counterparts will eventually explode the federal budget. Unfortunately, few in Congress—and neither of the major-party presidential candidates—have any interest in acknowledging, let alone confronting, the problem with Social Security’s insolvency.
That it’s insolvent isn’t debatable. Social Security faces a $10 trillion funding shortfall. Since 2010, Social Security has been running a constant cash flow deficit, meaning that the taxes collected for the program aren’t enough to cover the benefits paid to beneficiaries. To fill the gap and keep the checks going out, the program has been drawing from federal trust funds. However, the government’s trust funds aren’t like trust funds in the real world. Trust funds in the real world contain assets; the government’s trust funds basically contain IOUs. What that means in simple terms is that the government already has to go further into debt to pay Social Security’s bills—and it’s only going to get worse, writes Veronique de Rugy.